Please look over my solution to this week's module problem. For the variable costing solution, it seems that I do not include beginning inventory in the computation. (You can easily reconcile my solution to one that follows the computation shown in the text that does include the beginning inventory. The contribution margin and net income will be the same.) For the absorption costing solution, I do include beginning inventory at its stated dollar amount. Why does it work for me to ignore beginning inventory for variable costing but not for absorption costing? Data Variable Absorption Costs Manufacturing Costs Variable 8.75 per unit Fixed 105,825 per month S & A Costs Variable Fixed 2.85 per unit 45,800 per month Beginning Inventory Units Amount 2,700 23,625 Variable 35,856 Absorption SP 36.90 Unit Sales Units Produced 6,500 8,500 Data Variable Absorption Sales VC CM 239,850 Selling price times unit sales 75,400 (Variable manufacturing + variable S & A) * units sold 164,450 151,625 Fixed manufacturing + fixed S & A 12,825 FC NI Data Variable Absorption Computation of COGS Unit Cost Variable Manufacturing FOH per unit 8.75 Given 12.45 Total FOH divided by units produced 21.20 COGS From Beginning Inventory From Current Production 35,856 Given 80,560 Unit cost (see above) times unit sales less unit from beginning inventory 116,416 Sales COGS Gross Margin S & A NI 239,850 selling price times unit sales 116,416 See above 123,434 64,325 Variable S & A times unit sales + fixed S & A 59,109